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Canada's national weekly current affairs magazineTue, 03 Mar 2015 21:58:13 +0000en-CAhourly1http://wordpress.org/?v=3.5.2About that debt crisis: never mindhttp://www.macleans.ca/economy/business/about-that-debt-crisis-never-mind/
http://www.macleans.ca/economy/business/about-that-debt-crisis-never-mind/#commentsWed, 29 May 2013 12:00:00 +0000Nick Taylor-Vaiseyhttp://www2.macleans.ca/?p=389319The poster child for global economic instability appears, against all odds, to be making a comeback.
After four years of recession, Greece is looking attractive to investors who are gaining…

The poster child for global economic instability appears, against all odds, to be making a comeback.

After four years of recession, Greece is looking attractive to investors who are gaining confidence in its gradual turnaround, which some analysts predict could lead to economic growth as early as next year.

The credit-rating agency Fitch upgraded the country’s sovereign debt from CCC to B- on May 14. That’s still a junk rating, but it’s an important vote of support for Greece’s aggressive austerity program. The Athens stock market, meanwhile, is up 80 per cent this year and Greek government and corporate bonds are suddenly being snapped up as fears of a “Grexit” from the eurozone fade.

Fitch wasn’t exactly effusive in its praise, however. It warned that, in Greece, “tangible economic recovery remains elusive, while resistance to reform is high.” The country has been hit by massive protests against government cuts, while the unemployment rate reached 27 per cent this year. The country’s debt levels also aren’t yet sustainable, Fitch said, and they’ll only get there if the recovery continues and a budgetary surplus is achieved, as planned, this year.

]]>http://www.macleans.ca/economy/business/about-that-debt-crisis-never-mind/feed/3German chancellor Merkel does not rule out forgiving some of Greece’s debt after 2014http://www.macleans.ca/general/german-chancellor-merkel-does-not-rule-out-forgiving-some-of-greeces-debt-after-2014/
http://www.macleans.ca/general/german-chancellor-merkel-does-not-rule-out-forgiving-some-of-greeces-debt-after-2014/#commentsMon, 03 Dec 2012 09:53:11 +0000The Associated Presshttp://www2.macleans.ca/?p=322574BERLIN – Germany no longer rules out the possibility of forgiving Greece some of its debt once the country’s finances are in order, Chancellor Angela Merkel said, signalling a softening…

BERLIN – Germany no longer rules out the possibility of forgiving Greece some of its debt once the country’s finances are in order, Chancellor Angela Merkel said, signalling a softening of her government’s tough stance on Greece.

The question of debt forgiveness, or a “haircut,” can be revisited after the current bailout program will be successfully concluded and the government in Athens no longer takes on new debt, Merkel said in an interview with the German Sunday tabloid Bild am Sonntag.

Merkel’s government had previously ruled out forgiving debt, arguing that Greece must implement the agreed-upon austerity measures and structural reforms in return for its bailout loans. But the International Monetary Fund and many economists say eurozone nations must also forgive Greece some of its debt to allow the country to overcome its debt crisis.

Greece is trapped by an unsustainable debt level — forecast to reach 190 per cent of the country’s economic output next year — which forces it to drastically slash its budget. That, in turn, deepens the country’s recession, and makes Greece’s debt load rise even more in relation to its gross domestic product.

When asked about a haircut on Greece’s debt as a way out of the situation, Merkel told the newspaper “when Greece one day again manages with its revenue, without taking on new debt, then we have to look anew at the situation and reevaluate.”

“That won’t be before 2014-2015 if all goes as planned,” she added.

Greece has promised its international creditors to achieve a budget surplus of 4.5 per cent of its GDP by 2016, which would enable the country to start paying back part of its debt.

Greece, which is about to enter its sixth consecutive year of a deep recession that has pushed unemployment up to 25 per cent, is being kept afloat with rescue loans from its European partners and the International Monetary Fund.

German opposition leaders and analysts have accused Merkel of playing down the need to write off some of Greece’s debt held by eurozone governments before national elections in Germany next year for fear of voter retribution.

Merkel did not directly address that charge, noting only that Greece’s current bailout programs runs through 2014, hinting that she sees no need for yet new measures before then.

The hawkish head of Germany’s central bank, Jens Weidmann, last month said that Greece will eventually need a haircut, but it should only be granted after a prolonged period of budgets cuts and labour reforms there.

Earlier this year, Greece reached a deal with its private creditors to wipe some €100 billion ($130 billion) off its national debt, or about half of the country’s GDP.

Still, a second haircut on Greece’s debt from the eurozone rescue loans might be necessary. Analysts say such a haircut could cost Germany, the main contributor to the bailouts, up to €17 billion ($22 billion) — more than 5 per cent of Berlin’s annual budget.

Merkel’s comments came only two days after Germany’s parliament voted in favour of granting Greece more lenient terms on its bailout program, clearing a necessary hurdle for disbursing a €44 billion ($57 billion) rescue loan payment in December that Athens needs to avoid bankruptcy.

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Juergen Baetz can be reached on Twitter at http://www.twitter.com/jbaetz

]]>http://www.macleans.ca/general/german-chancellor-merkel-does-not-rule-out-forgiving-some-of-greeces-debt-after-2014/feed/0Chancellor Merkel says she understands German taxpayers’ frustration over Greek bailoutshttp://www.macleans.ca/general/chancellor-merkel-says-she-understands-german-taxpayers-frustration-over-greek-bailouts/
http://www.macleans.ca/general/chancellor-merkel-says-she-understands-german-taxpayers-frustration-over-greek-bailouts/#commentsSat, 01 Dec 2012 15:26:12 +0000The Associated Presshttp://www2.macleans.ca/?p=322343BERLIN – Chancellor Angela Merkel said she understands the frustration felt by many Germans over the repeated bailout programs for debt-ridden Greece, but insisted they are in her country’s self-interest…

BERLIN – Chancellor Angela Merkel said she understands the frustration felt by many Germans over the repeated bailout programs for debt-ridden Greece, but insisted they are in her country’s self-interest because they help stabilize the eurozone as a whole.

Merkel’s comments came a day after Germany’s parliament voted in favour of granting Greece more lenient terms on its bailout program, clearing a necessary hurdle for disbursing a €44 billion ($57 billion) rescue loan payment in December.

“I obviously feel many citizens’ skepticism, and partly understand it, because Greece has often disappointed its partners in the past,” Merkel told Sunday tabloid Bild am Sonntag in an interview released Saturday. “A lot of what the Greek leadership has promised wasn’t lived up to.”

The new Greek government, however, “finally” shows the necessary resolve “to change the country, to create modern structures,” she said.

A German poll published Friday showed that 46 per cent of 1,300 people polled favoured letting Greece go bankrupt, only 43 per cent thought Greece should receive further rescue loans. A total of 69 per cent of those surveyed for public broadcaster ZDF thought that Greece itself hasn’t done enough to overcome the crisis. The ZDF poll’s margin of error was 3 per cent.

Overly indebted Greece, which is about to enter its sixth consecutive year of a deep recession that has pushed unemployment up to 25 per cent, is being kept afloat with rescue loans from its European partners and the International Monetary Fund in return for implementing harsh budget cuts and structural reforms.

“For the large majority of Greeks this upheaval comes with great sacrifices, especially the poor in Greece go through very hard times,” Merkel told the newspaper.

The chancellor defended assisting Greece as being “in Germany’s interest” because it helps stabilizing the 17-nation eurozone on which her nation’s prosperity depends.

“I will continue to do what is best for Germany and Europe and what keeps the financial consequences as little as possible and does not expose us to unacceptable risks,” she said.

PARIS – A new forecast says the world’s economic recovery will be “hesitant and uneven” next year, with Europe’s debt troubles dragging down growth in more vibrant economies.

The Organization for Economic Cooperation and Development says in a report Tuesday that the 17-country eurozone is expected to struggle further next year despite recent positive steps to stabilize the crisis.

It forecasts a 0.4 per cent contraction this year in the eurozone and 0.1 per cent fall next year.

Elsewhere, the OECD is predicting the U.S. economy will grow 2 per cent next year. The global economy is expected to grow 3.4 per cent too.

The Paris-based international agency warned the U.S. and Europe against cutting spending too sharply and too quickly, saying that could further hurt growth prospects.

]]>http://www.macleans.ca/general/oecd-warns-that-global-recovery-is-weakening-as-euro-crisis-saps-growth/feed/0Debt relief deal brings measure of relief to Greece but country still faces many hurdleshttp://www.macleans.ca/general/debt-relief-deal-brings-measure-of-relief-to-greece-but-country-still-faces-many-hurdles/
http://www.macleans.ca/general/debt-relief-deal-brings-measure-of-relief-to-greece-but-country-still-faces-many-hurdles/#commentsTue, 27 Nov 2012 10:57:55 +0000The Associated Presshttp://www2.macleans.ca/?p=319878ATHENS, Greece – Greece has avoided imminent bankruptcy after its international creditors finally agreed to give it the money it urgently needs but the cash-strapped country’s economic distress is likely…

ATHENS, Greece – Greece has avoided imminent bankruptcy after its international creditors finally agreed to give it the money it urgently needs but the cash-strapped country’s economic distress is likely to drag on for years to come.

After three weeks of negotiations, Greece’s euro partners and the International Monetary Fund agreed to release a vital loan payment and introduce a series of measures designed to reduce the country’s massive debts to a more manageable level within a decade. These include reducing the interest rates Greece has to pay on the loans and a still-vague bond buyback program.

Greek Prime Minister Antonis Samaras hailed the agreement in Brussels early Tuesday as a victory that heralds “a new day for all Greeks,” but the reaction in the markets was a bit more cautious.

Most stock markets in Europe were higher. The Stoxx 50 index of leading European shares was up 0.5 per cent, while the main stock index in Athens rose 0.6 per cent. The euro gave up earlier gains to trade 0.2 per cent lower at $1.2964.

“There remains the potential for this deal to fall apart in the medium term as there are a lot of moving parts and it is a long way away from the permanent fix that the IMF had been insisting upon,” said Gary Jenkins, managing director of Swordfish Research. “Instead it is just one more big kick of the can down the road.”

For three years, Greece has been struggling to convince markets as well as its creditors that it can get a grip on its public finances, which spiraled out of control following the financial crisis of 2008. The country is predicted to enter its sixth year of recession and is weighed down by an unemployment rate of 25 per cent.

The so-called troika of the European Central Bank, IMF and the European Commission has twice agreed to bail out Greece, pledging a total of €240 billion ($310 billion) in rescue loans — of which the country has received about €150 billion ($195 billion) so far. In return for its bailout loans, Greece has had to impose several rounds of austerity measures and submit its economy to scrutiny.

Without the bailout money, the country would be staring bankruptcy in the face together with a possible exit from the 17-country eurozone, with potentially chaotic repercussions for the world economy.

This was the third time in the last two weeks that finance ministers from the 17 European Union countries that use the euro had tried to hammer out a deal on the next installment of bailout money for struggling Greece.

The installment will total some €44 billion ($57 billion) but still requires the authorization of a number of Parliaments in Europe.

The main aim of the bailout program is to right Greece’s economy and get it to a point where it can independently raise money on the debt markets. It has been clear for months that the country is far from achieving that goal. The talks have centred on trying to get Greece back on the path to sustainability by reaching an agreement on how the country’s debt load can be reduced.

Tuesday’s meeting reached an agreement where Greece’s debt level would be reduced from the current 150 per cent of its economic output to 124 per cent by 2020 and below 110 per cent by 2022. The IMF had originally insisted on a debt-to-GDP ratio of 120 per cent by 2020.

To reach this level, the meeting agreed on a raft of measures. These included:

—A cut of 100 basis points on the interest rate charged to Greece by other eurozone member states — excluding those that are also receiving bailouts.

—A 15-year extension of the maturities of loans from other countries and the eurozone’s bailout fund, the European Financial Stability Facility, and a deferral of interest payments by Greece on EFSF loans by 10 years.

— A program whereby Greece could buy back some of its debt from private investors. The details of this program are still to be agreed by the eurogroup and IMF.

One of the Parliaments that need to approve the bailout loan is Germany, where patience with repeated Greek rescues has been running low.

However, Rainer Bruederle, the caucus leader of the Free Democrats, the junior coalition partner, said he expects broad approval this time on Thursday.

“Conditions have been put together which maintain a tough mechanism toward Greece, but still save us from a collapse of the Greek economy possibly having consequences that could pull down the whole of Europe,” he said.

Greek newspapers were divided on whether the agreement would give the country breathing space to right its economy, or keep it trapped in years of recession and austerity.

____

Pylas contributed from London. Geir Moulson in Berlin also contributed.

]]>http://www.macleans.ca/general/debt-relief-deal-brings-measure-of-relief-to-greece-but-country-still-faces-many-hurdles/feed/0IMF and Eurozone finance ministers reach deal on Greece bailouthttp://www.macleans.ca/general/imf-and-eurozone-finance-ministers-reach-deal-on-greece-bailout/
http://www.macleans.ca/general/imf-and-eurozone-finance-ministers-reach-deal-on-greece-bailout/#commentsTue, 27 Nov 2012 03:13:14 +0000The Associated Presshttp://www2.macleans.ca/?p=319821BRUSSELS – The 17 European Union nations that use the euro have struck an agreement with the International Monetary Fund on a program to reduce Greek debt and put Athens…

BRUSSELS – The 17 European Union nations that use the euro have struck an agreement with the International Monetary Fund on a program to reduce Greek debt and put Athens on the way to get the next installment of its much-needed bailout loans.

The first disbursement is set to take place Dec. 13, said Jean-Claude Juncker, head of the eurogroup of finance ministers, after Tuesday’s decision.

Mario Draghi, President of the European Central Bank, said markets should pay heed. “It will certainly reduce the uncertainty and strengthen confidence in Europe and in Greece.”

This was the third time in the last two weeks that finance ministers from the eurozone had tried to hammer out a deal on the next installment of bailout money — some €44.6 billion ($57.8 billion).

In Athens, Prime Minister Antonis Samaras welcomed it as a great victory. “As Greeks, we fought together. And tomorrow a new day begins for all Greeks.”

And the EU lauded all Greeks for holding their country back from the brink.

“We strongly believe in the Greek capacity to recover. The Greek people are courageous people. They are willing to bring their country back on the path of growth,” Juncker said.

The so-called troika of the European Central Bank, IMF and the European Commission, which is the 27-country EU’s executive arm, have twice agreed to bail out Greece, pledging a total of €240 billion ($310 billion) in rescue loans — of which the country has received about €150 billion ($195 billion) so far. In return for its bailout loans, Greece has had to impose several rounds of austerity measures and submit its economy to scrutiny.

Greece is predicted to enter its sixth year of recession shortly and has a quarter of its workforce out of a job, and there had been fears it might be forced to drop out of the eurozone, destabilizing other countries in the process.

The main aim of the bailout program is to right Greece’s economy and get it to a point where it can independently raise money on the debt markets. It has been clear for months that the country is far from achieving that goal. The talks have centred on trying to get Greece back on the path to sustainability by reaching an agreement on how the country’s debt load can be reduced.

Juncker said the agreement includes:

— A plan to reduce Greece’s debt level to 124 per cent of its gross domestic product by 2020 and below 110 per cent by 2022. The IMF had originally insisted on a debt-to-GDP ratio of 120 per cent by 2020.

—A cut of 100 basis points on the interest rate charged to Greece by other eurozone member states — excluding those that are also receiving bailouts.

—A 15-year extension of the maturities of loans from other countries and the eurozone’s bailout fund, the European Financial Stability Facility, and a deferral of interest payments by Greece on EFSF loans by 10 years.

“This is not just about money,” Juncker said. “It is the promise of a better future for the Greek people and for the euro area as a whole.”

The head of the IMF, Christine Lagarde, also said the agreement was significant.

“We wanted to make sure that Greece was back on track,” Lagarde said. “If you put it all together it is a significant amount.”

Greece will get €34.4 billion ($40.84 billion) straight away and the rest in separate installments in January, February and March.

The political agreement reached Tuesday will have to be submitted to parliaments in some countries. After that, the finance ministers plan to hold another meeting, either in person or by telephone, to give final approval to the disbursement.

___

Pan Pylas in London, Geir Moulson in Berlin, and Derek Gatopoulos in Athens contributed to this report. Don Melvin can be reached at http://twitter.com/Don_Melvin.

BERLIN – Germany’s chief financial regulator is backing calls for tougher rules on banks’ government debt holdings, but says they shouldn’t be rushed.

Jens Weidmann, the head of Germany’s central bank, last week said banks should have to secure those bonds — viewed before Europe’s debt crisis as a safe asset — with capital of their own and advocated an unspecified limit on banks’ involvement with government creditors. He argued that would help prevent governments and banks amplifying each other’s problems.

Elke Koenig, who heads Germany’s BaFin financial regulator, was quoted Sunday as telling newspaper Welt am Sonntag it’s a problem “that no capital has to be held back for government bonds” and that needs to change long-term. But she added: “The question is, when is the right point to change it?”

]]>http://www.macleans.ca/general/german-financial-supervisor-backs-calls-for-tougher-rules-on-banks-government-bond-holdings/feed/0Jim Flaherty says Canada is ready for fallouthttp://www.macleans.ca/general/finance-minister-jim-flaherty-says-canada-is-ready-for-fallout/
http://www.macleans.ca/general/finance-minister-jim-flaherty-says-canada-is-ready-for-fallout/#commentsTue, 05 Jun 2012 01:37:29 +0000macleans.cahttp://www2.macleans.ca/?p=263956First up Tuesday morning, Jim Flaherty says he’ll be on the phone with his Group of Seven counterparts to discuss worsening conditions in the eurozone.
Just try to keep the…